What is OTT Advertising and How Does it Work
The way audiences watch television has fundamentally changed over the past decade of years. Some said that the era of TV is over. Still, what we have now is not the end of television but rather a shift in the viewing habits. In the 1950s and 1960s, families would gather around their TV sets after dinner and watch Walter Cronkite. A decade later in the 1970s, when subscription came along, linear broadcasting was replaced by cables, and it was not too long before Internet-powered gadgets and phones came along. That’s where OTT advertising popped up to the scene.
The viewers watch all of the content that is being broadcasted on TV in new locations and ways because now they have a connection to the Internet. This gave birth to the umbrella term called “Advanced TV”. All of the new broadcasting methods include Connected TV, Addressable, and Over the top. The notions are often used interchangeably, but they have their differences:
Connected TV - The word “connected” is referring to an internet connection and this term can be applied to any TV set that is by any means connected to the web. Connected TV is also enabled by gaming consoles, PlayStation, Xbox, online TV streaming services, and cable providers. More about Connected TV Advertising read here.
Addressable TV - This method delivers specific content to a specific audience. Think of it as content with the “address” of a specific audience on it. Addressable TV is enabled by the same technologies as connected. More about Addressable TV Advertising read here.
Over The Top (OTT) - This method allows advertisers to deliver content to those people who do not want to pay for cable. This form of contention is currently in demand and offers many advantages to both advertisers and the viewers alike.
What is OTT Advertising?
Before we get into details, it is important to get an OTT advertising definition. OTT advertising is an individualized content provided to the viewers' TV sets while they watch the same TV show. Thus, OTT advertising is a targeted ad delivery on Internet-connected TV sets enabled by programmatic technology.
Thanks to OTT, advertisers can expand their audience reach that previously was only available on traditional TV. In fact, some experts predict that the money coming from OTT ads will increase anywhere from 45-60%. Therefore, if you are an ad tech pioneer, you will be reaping great rewards in the near future.
How is Over the Top Advertising Delivered?
The delivery method depends on streaming platforms and how they interact with OTT devices. For example, this could be through the Video Ad Serving Template (VAST). Ad insertion could be performed via server side (SSA) or client side (CSAI). The entire process looks something like this:
1. Firstly, an OTT audience is created. The composition of this audience will be based on the data obtained from the platform. In some cases, this data can be enhanced to include additional information about the household.
2. Launching of the campaign. The platform will connect the audience to a particular TV subscriber list across all OTT platforms.
3. Ads will be channeled to the audience through the OTT platforms. Various tags will be used to tell the media player how a particular ad should appear to the viewer. At this stage, all of the information is received and processed by the player.
4. The final stage involves the platform sending a report back to the advertiser which contains all kinds of statistics and metrics about the ad which is key to determining whether the ad campaign was successful or not.
Why is OTT Popular Now and How Does it Impact OTT Ads?
One of the reasons why OTT is on the rise is because there is an increasing amount of dissatisfied paid TV customers. While there are many reasons why people are not happy with the cable or dish network provider, there are gradually more and more options becoming available to consumers who want to get rid of the traditional TV. OTT can provide them with a wide variety of payment and viewing options which allows the viewers to free themselves of contracts that their cable providers locked them into. In the end, the pay-TV providers are not agile enough to keep up with user demands.
For the consumer, one of the biggest benefits of OTT is being able to stream content over many devices. A lot of the OTT apps let you enjoy content on your computer, tablet, smart TV and even gaming console if you own one. There have been many studies done to determine which of these devices the viewers prefer to use and determining which type(s) of content is best suited for which devices, the point is that the user is presented with a seemingly unlimited viewing selection both in terms of content and platform.
For the advertiser, the biggest benefit is that people who are watching content on OTT platforms cannot skip ads, close a window, install some kind of ad blocker or any other ‘ad shield.’ Interestingly enough, metrics such as the click-through rate are totally irrelevant when it comes to OTT since it is not possible to click a TV screen and interaction with an ad is rare. Video completion rates are sky high on OTT platforms and cannot be compared with the much lower numbers of the in-browser ads.
We have already investigated the popularity of OTT, but what about the ads themselves? According to TDG research, the overall ad length per half an hour of OTT watching in the US will increase by 60% between 2014 and 2020. Currently, the average length is 3.2 minutes, and it will rise to 5.1 minutes. OTT is definitely a powerful force that is driving broadcast content. Right now, there is a lot of money being made on on-demand content, but interestingly enough OTT subscription devices are responsible for this flow of revenue.
Benefits of Over the Top Advertising
OTT is a win-win for everybody involved. Consumers love it because they no longer have to pay for TV that is limited in terms of content and convenience. Advertisers love it because it has massive revenue potential. In addition to this OTT also offers:
Targeting - OTT enables shorter but more relevant ads because it knows where the audience is located geographically. OTT platform can break the audience into segments for better metrics, and it can tell you which device(s) the viewers are using most often to access your content.
Dynamic ad insertion - Lets you interchange ad creatives in linear, live or video-on-demand content.
Advanced analytics - With all of the data obtained about your audience, you can use it to find which ads are working for you and which ones are not to optimize future ads with the insights you obtained.
Challenges of OTT Advertising
As we found out earlier, there are many advantages that OTT can offer you which regular TV advertising cannot. However, there are still some problems that need to be resolved before we can finally declare that OTT advertising is a perfect advertising medium:
Management and measurability. Right now, if advertises wants to create OTT content, they can only channel them through cable providers or OTT platforms. In case you chose cable providers there will be no opportunity to manage the ad in real-time as well as no chance to measure performance metrics. On OTT platforms it is still difficult to measure engagement and user reaction since OTT ads are not measured by clicks.
Regulations. OTT advertising is kind of the Wild West, i.e. there are no rules or regulations that govern the quality of it so far. Ad fraud prevention here is very important. While it is not as vulnerable as something like desktop computers, ad fraud has managed to find its way into OTT and could pose significant problems if protective regulations are not in place. This includes things like invalid traffic detection, standard naming practices, and many other conventions.
Functionality. A lot of OTT devices do not have the same functionalities that web browsers. For example, if you run an add in an internet browser, you can obtain all kinds of information from the tracking pixel or cookie that will give you the insights considering conversion rate of a particular source. This is not possible right now on some OTT devices. VPAID was introduced to enhance ad experiences and provide ad performance insights. We should point out here, that due to the restrictions of OTT platforms, often you cannot implement executable ad units.
OTT Ad Insertion Methods
Client-side ad insertion (CSAI) this is the old method when the advertiser inputs the ad into the platform before the viewer sees it. Even though today most of the ads are served to the viewer through this method, there are some drawbacks. First of all, there is an excellent chance that your ad will get caught by the ad blocker and will never get to the viewer. Also, it features a lower quality of service because the player often switches back and forth between content and the advertisements.
SSAI or “Stitching”
SSAI stands for server-side ad-insertion content delivery. By utilizing this method, you can display the ads to your audience without any interruptions. In essence, it is a real-time combination of the ads and core content. What’s great about this method is that the viewer sees it one frame at a time, thus making it difficult for ad blockers to spot.
SSAI gives the audience an opportunity to view live content without any interruptions because the content itself is stitched together with the ad. This way there are no random pauses or gaps in between. If you would like the ads to be clickable, it is possible to do so, but this will require additional work.
There are many providers out there who underestimate ad insertion functionality. However, some OTT platforms go above and beyond in order to provide their clients with metrics and interactivity that feature VPAID tags built in. The ‘stitching’ that we’ve mentioned earlier is a win for the viewer, but it also sets some restrictions on the advertiser, since technology is still built on client-side methodologies.
Tags Used for Communicating With OTT Devices
The VAST tags are important because they determine how the ad will display. They tell the player everything, starting from where the ad should appear on the screen, for how long, and everything else concerning the ad’s appearance.
Video Player-Ad Interface Definition (VPAID) tags build on the capabilities of VAST they make the ad interactive and add metrics. However, there is a big caveat: stitching is not an option here. This could pose significant problems since you will have to find a detour around all of the pre-rolls that are currently being offered in Europe. Still, perhaps the upside is greater with this method because it provides better insights and metrics in terms of viewability and might even offer some interactivity. Therefore, if stitching is not a deal breaker for you, this could be the best option among all other tags.
The Future of OTT
OTT advertising has a bright future despite all of the obstacles. The IAB sees the development happening in stages, kind of like what we saw it with programmatic.
Most providers that offer streaming services receive the biggest portions of their revenue from subscriptions the customers are paying for. This is great because the advertisers will know where their audience is located and therefore, will be able to tailor their offers much better. Those who don't have such data will have to rely on data obtained from third parties which will probably not be as accurate.
In the next round, the targeting will remain based on the audience’s viewing data obtained from the providers. In addition, matching devices with other ones located inside the users’ homes can substantially enhance this data with information about browsing and online shopping history to make the targeting even more precise.
Soon OTT ads will be available for both private and public auctions on any demand-side platform that supports these creative formats. This will allow brands to get the most out of their ad campaigns by targeting based on intent. The viewability will also increase because the content offered to these audiences will be better suited towards products they are interested in. Serving OTT ads via SSP will also be beneficial for publishers who want to keep their users engaged instead of repelled.
Even though OTT offers a wide array of possibilities, it will definitely provide even more in the future since technology continues to evolve. If we take into account, we’ll understand that OTT advertising will occupy much larger market share in the future. Harnessing this new technology and using it to its fullest potential will become a priority for many businesses since there’s nothing more engaging and immersive for users than big screen TVs.
Merge traditional mediums with new OTT advertising opportunities. Let us assist you today!
Irina Kovalenko, CMO of SmartyAds